The parties to a merger which has an effect in South Africa and
which exceeds certain combined asset and/or turnover thresholds established by
the Competition Act may not implement the transaction without first obtaining
the approval of the competition authorities.
| 8.6 |
Definition
|
|
8.6.1 |
A merger occurs when
one or more firms directly or indirectly acquire or establish direct or
indirect control over the whole or part of the business of another firm. The
term "firm" includes a person, partnership or trust. The Competition Appeal
Court has given the term "control" the widest possible meaning so as to allow
the relevant competition authorities to examine a wide range of transactions
which could result in an alteration of the market structure and in particular
which may reduce the level of competition in the relevant market. |
|
8.6.2 |
A merger may be
achieved in any manner, including through: |
|
|
8.6.2.1 |
purchase or lease of shares, an
interest or assets of the other firm in question; or |
|
|
8.6.2.2 |
amalgamation or other combination
with that other firm. |
|
8.6.3 |
Ultimately, any
transaction that allows one or more firms to materially influence the policy of
another firm, is likely to give rise to a merger. |
|
8.6.4 |
In addition to
assessing the effect of a merger on competition, the authorities take into
account socio-economic factors such as the effect of the merger on employment,
small businesses and historically disadvantaged persons. As a result it is not
a pre-requisite to notification that a merger has an effect on competition.
Employees and organised labour must be notified of the merger and may
participate in the proceedings. Other interested parties (including competitors
and customers) may also intervene in merger proceedings with the leave of the
Tribunal. |
| 8.7 |
Thresholds
|
|
8.7.1 |
The Competition Act
establishes three categories of mergers which are determined with reference to
the turnover or assets (whichever is the higher) of the acquiring firm and the
target firm. |
|
8.7.2 |
A small merger occurs
where the combined assets or turnover of the acquiring firm and the target firm
are below R560 million or the target firm's assets or turnover are below R80
million. |
|
8.7.3 |
An intermediate merger
occurs where the combined assets or turnover of the acquiring firm and the
target firm equal or exceed R560 million and the target firm's assets or
turnover equal or exceed R80 million. |
|
8.7.4 |
A large merger occurs
where the combined assets or turnover of the acquiring firm and the target firm
equal or exceed R6,600 million and the target firm's assets or turnover equal
or exceed R190 million. |
|
8.7.5 |
For purposes of
calculating the thresholds, the entire acquirer group is taken into account. In
relation to the target the firm over which control is transferred, together
with all firms controlled by such transferred firm, is taken into account.
|
| 8.8 |
Notification
|
|
8.8.1 |
The parties to a small
merger may implement the merger without approval, but the Commission may call
on the parties to notify the merger to the Commission at any time up to six
months after the implementation date, if it believes that the merger may
substantially prevent or lessen competition or cannot be justified on grounds
of public interest. In such an event, the parties may take no further steps to
implement the transaction pending approval. The parties to a small merger may
notify voluntarily prior to implementation. The Commission has issued a
guidance on small merger notification, it which it advises parties to a small
merger to voluntarily inform the Commission of a purposed transaction, if such
transaction meets any of the following criteria:
- At the time of entering into the transaction, or firms
within their group, are subject to an investigation by the Competition
Commission, in terms of Chapter 2 of the Competition Act, which deals with
Prohibited Practices; or
- At the time of entering into the transaction, any of the
firms or firms within the group, are respondents to pending proceedings,
referred to the Competition Commission in terms of Chapter 2 of the Act.
If these criteria are met, parties are advised, when
informing the Commission of the intended transaction, to provide information
regarding the transaction, the parties and the markets in which the parties
compete, Based on this information, the Commission will then inform parties to
the proposed small merger, whether the Commission requires a formal merger
notification, in respect of the transaction. |
|
8.8.2 |
The parties to an
intermediate or large merger may not implement the merger without the approval
of the competition authorities. In the Gold Field / Harmony case, the
Competition Appeal Court sought to distinguish between the completion of a
merger and its implementation, and held that what the Competition Act seeks to
prohibit is not the completion of a merger, but any implementation thereof
prior to authorization having been granted by the relevant competition
authorities. The judgment raises a number of practical difficulties and its
implications have not yet been tested before the Tribunal. |
|
8.8.3 |
The Competition Act
and the Rules promulgated there under set out in detail the procedure for
notifying the Commission of a merger. No time periods for notification are
prescribed, save that the parties may not implement a notifiable merger without
approval. |
|
8.8.4 |
The Commission has a
maximum of sixty business days to consider a small or intermediate merger. If
it has not approved or prohibited the merger on expiry of that time period, the
merger is deemed to have been approved. |
|
8.8.5 |
The Commission has
forty business days to consider and refer a large merger to the Tribunal. The
Tribunal may, on application by the Commission, extend this period by no more
than fifteen business days at a time. |
|
8.8.6 |
Within ten business
days of the referral of a large merger, the Tribunal must schedule a
pre-hearing or hearing. This period may be extended on application to the
chairperson of the Tribunal. Within ten business days of the hearing, the
Tribunal must approve or prohibit the merger and within twenty business days
thereafter must issue reasons for its decision. |
| 8.9 |
Fees |
|
No fee is payable to
the Commission for the notification of a small merger. The fees for
intermediate and large mergers are R100,000.00 and R350,000.00 respectively.
These are administrative fees payable to the Commission and are over and above
any legal fees that may be incurred if the assistance of an attorney is
obtained in preparing a merger notification. |
| 8.10 |
Evaluation
|
|
8.10.1 |
In evaluating a
merger, the Commission first considers whether the merger is likely to
substantially prevent or lessen competition. Factors considered by the
Commission include: |
|
|
8.10.1.1 |
the level of actual and potential
import competition in the market; |
|
|
8.10.1.2 |
the ease of entry into the market,
including tariff and regulatory barriers; |
|
|
8.10.1.3 |
the level and trends of
concentration, and history of collusion, in the market; |
|
|
8.10.1.4 |
the degree of countervailing power
in the market; |
|
|
8.10.1.5 |
the dynamic characteristics of the
market, including growth, innovation, and product differentiation; |
|
|
8.10.1.6 |
the nature and extent of vertical
integration in the market; |
|
|
8.10.1.7 |
whether the business or part of the
business of a party to the merger or proposed merger has failed or is likely to
fail; and |
|
|
8.10.1.8 |
whether the merger will result in
the removal of an effective competitor. |
|
8.10.2 |
If the Commission
finds that a merger is likely to have an anti-competitive effect, it may still
find the merger to be justifiable on the basis of efficiency, technology or
other pro-competitive gains that are shown to outweigh any anticompetitive
effect.. |
|
8.10.3 |
In considering all
mergers, including pro-competitive mergers, the Commission considers the effect
the merger will have on the public interest, with specific reference to its
effect on : |
|
|
8.10.3.1 |
a particular industrial sector or
region; |
|
|
8.10.3.2 |
employment; |
|
|
8.10.3.3 |
the ability of small and black
business to become competitive; and |
|
|
8.10.3.4 |
the ability of national industries
to compete internationally. |
|
8.10.4 |
A merger with no
anticompetitive effect could be prohibited if, for instance, it will result in
massive job losses. |
|
8.10.5 |
Following an
investigation by the Commission and, in the case of a large merger, a Tribunal
hearing, the merger may be approved; approved subject to conditions, or
prohibited. |
